Economic Analysis of Serious Accident Law in China

Abstract In recent years, serious accidents in China caused by negligence have resulted in tremendous damage to both human life and property. Taking a cost-utility analysis, law and economics considers that accident law can induce injurers to internalize the costs of harm through liability rules such as victim compensation and criminal imprisonment. Consequently, the injurers are motivated to avoid or reduce accident risks at a more effective level. This article applies the approach of law and economics into the analysis of serious accident laws in China. It argues that the current provisions should be revised to include criminal fines on injurers, so as to enhance legal deterrence, stimulating them to improve the level of care as well as the level of behavior to reduce the incidence of accidents.